EXCISE TAXES

Excise Tax is a tax on the production, sale or consumption of a commodity in a country.

The NIRC defines the goods subject to excise tax:

Section 129. Goods Subject to Excise Taxes – excise taxes apply to goods manufactured or
produced in the Philippines for domestic sales or consumption or for any other disposition and
to things imported. The excise tax imposed herein shall be in addition to the value-added tax
imposed under Title IV.
Excisable articles:
 Certain goods manufactured or produced in the Philippines for domestic sales or consumption
or for any other disposition;
 Certain goods imported to the Philippines for domestic sales or consumption or for any other
disposition; or

The provision on Excise Tax was amended by Republic Act No. 10963 Or the Tax Reform for
Acceleration and Inclusion (TRAIN) Imposition of Excise Taxes, it included

 Non-essential services performed in the Philippines

PURPOSE OF EXCISE TAX:

1. To raise revenue;
2. To curtail consumption of certain commodities;
3. To protect domestic industries.

NATURE OF EXCISE TAX

 Tax on production/non-essential services
 Indirect tax

CHARACTERISTIC OF EXCISE TAX:

1. National
2. Indirect
3. Ad Valorem and specific
4. Proportional and progressive
5. Privilege/transactional

KINDS OF EXCISE TAX

 Specific tax – refers to the excise tax imposed which is based on weight or volume capacity or
any other physical unit of measurement

Manner of computation- no. of units/other measurement x specific tax rate

 Ad valorem tax – refers to the excise tax which is based on selling price or other specified
value of the goods/ articles.

Manner of computation- no. of units/ depending on measurement

x selling price of any specific value per unit
x Ad Valorem tax rate
Depending on the tax it is imposed upon the manufacturer, retailer or customer.

PERSON LIABLE TO EXCISE TAX

In general:
 On domestic or local articles
o Manufacturer
o Producer
o Owner or person having possession of articles removed from the place of production without
the payment of the tax

 On imported articles
o Importer
o Owner
o Person who is found in possession of articles which are exempt from excise taxes other than
those legally entitled to exemption

Others:
 On indigenous Petroleum
o Local sale, barter or transfer
 First buyer, purchase or transferee
o Exportation
 Owner, lessee, concessionaire or operator of the mining claim

TIMING OF PAYMENT
General rule:
 On domestic products
o Before removal from the place of production

 On imported products
o Before release from the custom’s custody

Specific rules:

 Locally manufactured petroleum products and indigenous petroleum

o Before removal from the place of production of such products

 Nonmetallic mineral or mineral products or quarry resources

o Upon removal of such products from the locality where mined or extracted

 Locally produced or extracted metallic mineral or mineral products

o Paid within 15 days after the end of the calendar quarter when such products were removed

 Imported mineral or mineral products, whether metallic or non-metallic

o Before their removal from customs custody

PLACE OF PAYMENT
 Excise tax return shall be filed with an tax paid to any:
o Authorized Agent Bank (AAB)
o Revenue Collection Officer
o Authorized City or Municipal Treasurer

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES AND RELATED CODAL SECTION:

1. Alcohol Products (Sections 141-143)

a. Distilled Spirits (Section 141)

b. Wines (Section 142)
c. Fermented Liquors (Section 143)

2. Tobacco Products (Sections 144-146)

a. Tobacco Products (Section 144)

b. Cigars & Cigarettes (Section 145)
c. Inspection Fee (Section 146)

3. Petroleum Products (Section 148)

4. Miscellaneous Articles (Section 149-150)

a. Automobiles (Section 149)

b. Non-essential Goods (Section 150)
c. Non-essential Service (Section 150-A) - RA 10963 [TRAIN Law))
d. Sweetened Beverages (Section 150-B)-(RA 10963 [TRAIN Law])

5. Mineral Products (Sections 151)

EXCISE TAX ON ALCOHOL PRODUCTS

Excise Tax on Distilled Spirits

Section 141. Distilled Spirits – on distilled spirits, subjection to the provisions of Section 133 of
this Code, an excise tax shall be levied, assessed and collected based on the following
schedules:

In addition to Ad Valorem Tax, a specific tax per proof of liter

DISTILLED SPIRITS

It is the substance known as ethyl alcohol, ethanol or spirits of wine, including dilutions,
purification and mixtures thereof, from whatever source, by whatever process produced and
shall include whisky, brandy, rum, gin and vodka, and other similar products or mixtures.

Distilled spirits have an additional ad valorem tax of 20% of the NRP, excluding the value added
tax and excise tax. The specific tax per proof liter is subject to 4% adjustment every year.

 Medicinal preparations, flavoring extracts, and other preparations, except toilet preparations,
of which, excluding water, distilled spirits for the chief ingredient, shall be subject to the same
tax rate as such chief ingredient.

 This tax shall be proportionately increased for any strength of the spirits taxed over proof
spirits, and the tax shall attach to this substance as soon as it is in existence as such, whether it
be subsequently separated as pure or impure spirits, or transformed into any other substance
either in the process of original production or by any subsequent process.

 Manufacturers and importers of distilled spirits shall, within 30days from the effectivity of this
Act, and within the first 5 days of every 3rd month thereafter, submit to the Commissioner a
sworn statement of the volume of sales for each particular brand of distilled spirits sold at his
establishment for the 3-month period immediately preceding.

Excise Tax on Wines

Section 142. Wines – on wines, there shall be collected per liter of volume capacity effective on
January 1, 2013, the following excise taxes:

1Refer to Section 141

*excluding the excise tax and the value-added tax

**The rates of tax imposed under this Section shall be increased by 4% every year thereafter
effective on January 1, 2014, through revenue regulations issued by the Secretary of Finance.

 Manufacturers and importers of wines, within 30days from the effectivity of this Act, and within
the first 5 days of every 3rd month thereafter, submit to the Commissioner a sworn statement of
the volume of sales for each particular brand of distilled spirits sold at his establishment for the
3- month period immediately preceding.

WINES

Normally have carbon dioxide on them due to fermentation process. Sparkling wines have sugar
and yeast on them which makes them bubbly due to continuous fermentation even after bottling.
"Still" wines are wines with carbon dioxide removed.

Carbonated wine is one which is artificially added with carbon dioxide to influence character or
taste of the wine.

Fortified wines mean natural wines to which distilled spirits are added to increase their alcohol
strength. Fortified wines containing more than 25% of alcohol shall be taxed as distilled spirits.

Excise Tax on Fermented Liquors

Section 143. Fermented Liquor – there shall be levied, assessed and collected an excise tax on
beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy, and similar
domestic fermented liquors in accordance with the following schedule:

*excluding the excise tax and the value-added tax

 However, in case of fermented liquors affected by the “no downward reclassification” provision
prescribed under this Section, the 4% increase shall apply to their respective applicable tax
rates.

FERMENTED LIQUORS

Includes beer, lager beer, ale, porter and similar products except tuba, basi, tapuy and similar
products.
Conditional Tax-free Removal of Alcohol Products
Denaturation of Alcohol or removal of wines and distilled spirits for treatment of tobacco leaf

When wines and distilled spirits are to be used for the treatment of tobacco leaf by
manufacturers of cigars and cigarettes, this is not human consumption; hence, tax free, but
such wines and distilled spirits must first suitable denatured.

Denatured alcohol of not less than 180° proof (90% absolute alcohol) when suitably denatured
and rendered unfit for oral intake is exempt from excise tax. Denatured alcohol used for motive
power shall be taxed as petroleum products.

Alcohol rendered unfit for oral intake after denaturation but restored fit for oral intake after
undergoing fermentation, dilution, purification, mixture or any other similar processes shall be
subject to tax as alcohol products.

Rectification of Spirits
• Spirits requiring rectification may be removed from the place of production to another
establishment for purposes of rectification without repayment of taxes but this requires
submission of a joint bond by the distiller and the rectifier conditioned on the rectifier's payment
of the excise tax on the rectified alcohol.

• No loss for rectification and handling shall be allowed.

• The rectifier shall pay the excise tax on such losses.
• Rectifiers using spirits with unpaid taxes shall be liable for the payment of the excise tax
thereon.

Removal of fermented liquors to bonded warehouses

Fermented liquors may be removed or transported from the brewery or other place of
manufacture to a bonded warehouse used by him exclusively for storage or sale in bulk of
fermented liquor, not less than 1,000 liters at one removal without repayment of the tax under a
permit which shall be granted by the CIR.
Conditional Tax-free Removal of Alcohol Products

Removal of damaged liquors

When fermented liquor has become sour or otherwise damaged so as to be unfit for use as
such, brewers may sell and after securing a special permit from the CIR, remove the same
without the repayment of tax thereon, in cask or other packages, distinct from those ordinarily
used for fermented liquors, each containing not less than 175 liters with a note of their contents
permanently affixed thereon.

Excise Tax on Tobacco Products

As amended by Revenue Regulations No. 3-2018 pursuant to the Provisions of RA No. 10963
(TRAIN Law)

2021 updates that affects alcohol and tobacco products:

RA 11346 – increases excise tax on tobacco and imposing excise tax on heated tobacco
products and vapor products and increasing penalty for violations

RA 11467 – amends sections to RA 8424 or the NIRC of 1997

BIR Rev Reg. No. 7-2021 which is the IRR for of the 2 laws

There are gradual progression of tax rates from 202-2024 onwards :

Here are the updated rates for heated tobacco and vapor products:

It also includes updates on cigars and cigarettes which is computed as Ad Valorem Tax plus
specific tax
Excise Tax on Tobacco Products Section 144. Tobacco Products – There shall be collected an
excise tax of P1.75 effective on January 1, 2013 on each kilogram of the following products of
tobacco:

* The rates of tax imposed shall be increased by 4% every year thereafter effective on January
1, 2014, through revenue regulations issued by the Secretary of Finance.

 No tobacco products manufactured in the Philippines and produced for export shall be
removed from their manufacture or exported without posting of an export bond equivalent to the
amount of the excise tax due thereon if sold domestically: Provided, however, That tobacco
products for export may be transferred from the place of manufacture to a bonded facility, upon
posting of a transfer bond, prior to export
 Tobacco products imported into the Philippines and destined for foreign countries shall not be
allowed entry without posting a bond equivalent to the amount of customs duty, excise and
value added taxes due thereon if sold domestically.
 Manufacturers and importers of tobacco products shall, within 30 days from the effectivity of
this Act and within the first 5 days of every month thereafter, submit to the Commissioner a
sworn statement of the volume of sales for each particular brand of tobacco products sold for
the thre emonth period immediately preceding.
 Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in
his or its sworn statement herein required any pertinent data or information shall, upon final
findings by the Commissioner that the violation was committed, be penalized by a summary
cancellation or withdrawal of his or her permit to engage in business as manufacturer or
importer of cigars or cigarettes.

Excise Tax on Cigars

 Cigars – mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco.

Section 145 (A). Cigars – there shall be levied, assessed and collected on cigars an excise tax
in accordance with the following schedule:

* The rates of tax imposed shall be increased by 4% every year thereafter effective on January
1, 2014, through revenue regulations issued by the Secretary of Finance.
Excise Tax on Cigarettes (amended by TRAIN)

Tax rate per pack of 20’s, on cigarette packed by hand or by machine

Jan. 1 – June 30, 2018 = 32.50

 Cigarettes – all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or
in any other material.

Section 145 (B) (C). Cigarettes – there shall be levied, assessed and collected on cigarettes
packed by hand and machine an excise tax based on the following schedules

 Duly registered cigarettes packed by hand shall only be packed in 20s and other packaging
combinations of not more than 20.
 Understatement of the suggested net retail price by as much as 15% of the actual net retail
price shall render the manufacturer or importer liable for additional excise tax equivalent to the
tax due and difference between the understated suggested net retail price and the actual net
retail price.
 Vetoed: Incremental revenues from tobacco taxes shall be subject to Section 3 of the Act to
Promote the Development of the Farmer in the Virginia Tobacco Producing Provinces.

Excise Tax on Petroleum Products

As amended by Revenue Regulations No. 2-2018 pursuant to the Provisions of RA No. 10963
(TRAIN Law)

RA 10963 increases the tax rates on petroleum products in three (3) tranches beginning January
1, 2018 to January 1, 2020

For the period 2018 to 2020, the scheduled increase in the excise tax on fuel shall be suspended
for 3 months prior to the increase of the month when the average Dubai crude oil price based on
Mean of Platts Singapore (MOPS) reaches or exceeds US$ 80 per barrel.

TRAIN Law adjusted the excise tax on fuels that has not been yet amended since 1997. The
increase aims to address environmental and health concerns through increasing taxes on dirty
fuel. Below is the new tax rate on the first three years after the enactment of the law.
INDIGENOUS PETROLEUM – In general
Payment of Tax on domestic product is before the release from place of production
Whereas on imported products it would be before release from customs custody

Excise Tax on Miscellaneous Articles

Excise Tax on AUTOMOBILES (TRAIN)

RA 10963 restructures the tax schedule on the excise tax on automobiles by imposing ad
valorem tax rates that are directly applied to the net manufacturer's price/importer's selling price
instead of imposing marginal tax rates

Section 149. Automobiles – there shall be levied, assessed and collected an ad valorem tax on
automobiles based on the manufacturer’s or importer’s selling price, net of excise and value
added tax, in accordance with the following schedule: provided, that hybrid vehicles shall be
taxed at 50% of the applicable tax rates on automobiles subject to the conditions in section 9(E)
of this regulations: provided, further, that in the case of imported automobiles not for sale, the
tax imposed herein shall be based on the total landed value, including transaction value,
customs custody and all other charges.

If the selling price of the automobile is P750,000.00

Determine on what range of price it belongs and simply multiply it by the tax rate.

750 X 10

Excise Tax on Non-Essential Goods

Section 150. Non-essential goods – there shall be levied, assessed and collected a tax
equivalent to 20% based on the wholesale price or the value of importation used by the BOC in
determining tariff and customs duties, net of excise tax and value-added tax, of the following
goods:
 All goods commonly or commercially known as jewelry, whether real or imitation, pearls,
precious and semi-precious stones and imitations thereof; goods made of, or ornamented,
mounted or fitted with, precious metal or imitation thereof or ivory (not including surgical and
dental instruments, silver-plated wares, frames, or mountings for spectacles or eyeglasses, and
dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the
teeth); opera glasses and lorgnettes
 Perfumes and toilet waters
 Yachts and other vessels intended for pleasure or sports

Excise Tax on Non-Essential Services

Introduced by TRAIN RR No. 2-2019.

Section 1. Scope – pursuant to RA No. 10963, these regulations are hereby promulgated to
implement Section 150A on the excise tax on non-essential services of the NIRC, as introduced
by Section 46 of the TRAIN Law.

RR No. 2-2019. Section 3. Rate and Base of Excise Tax – there shall be levied, assessed, and
collected, and excise tax equivalent to:

COSMETICS TAX
A 5% tax based on gross receipts, net of excise tax and VAT, derived from the performance of
service on evasive cosmetic procedures, surgeries, and body enhancements, directed solely
towards improving, altering or enhancing the patient’s appearance.

Excise Tax on Sugar-Sweetened Beverage

Increasing the Tax of Sugar-Sweetened Beverages

Excise tax on sweetened beverages (SBs) is one of the new taxes imposed under Republic Act
(RA) 10963 or Tax Reform for Acceleration and Inclusion (TRAIN) Law which took effect last
Jan. 1. The Department of Finance (DOF) along with Department of Health (DOH) support this
as part of a comprehensive health measure to curb the consumption of SBs and address the
worsening number of diabetes and obesity cases in the country, while arising revenue for
complementary health programs that address these problems.

BEVERAGES COVERED Sweetened Juice Drinks Sweetened Tea Flavored Water All
Carbonated Beverages Energy and Sports Drinks Cereal and Grain Beverages Other Powdered
Drinks not classified as Milk, Juice, Tea or Coffee Other non alcoholic beverages, that contain
added sugar

BEVERAGES EXCLUDED All milk products, including Plain Milk, Infant Formula Milk,
Powdered Milk, etc. Meal Replacement and Medically Indicated Beverages Ground Coffee,
Instant Soluble Coffee and Pre-packaged Powdered Coffee Products 100% Natural Vegetable
Juices 100% Natural Fruit Juices

The SSB excise tax will help promote a healthier Philippines. Along with the Department of
Health (DOH), DOF supports this as part of a comprehensive health measure aimed to curb the
consumption of SSBs and address the worsening number of diabetes and obesity cases in the
country, while raising revenue for complementary health programs that address these problems.
This is a measure that is meant to encourage consumption of healthier products, to raise public
awareness of the harms of SSBs, and to help incentivize the industry to develop healthier
products and complements.
Consumption of SSBs, mostly soft-drinks, is significantly linked to high incidences of overweight,
obesity, and diabetes worldwide, including in low and middle-income countries. The National
Nutrition Survey (2003-2015) indicates an increasing trend of overweight or obese Filipinos
through the years and across age groups, especially among the poor.

The SSB excise tax, as a health measure, will encourage individuals and families to make
healthy choices to ensure a healthier and more productive population. To complement the SSB
excise tax, there is also a non-tax measures organized around the Health in All Policies
approach. This strategy is envisioned to include regulatory measures on marketing, mandatory
labeling, information and advocacy measures for health promotion, and improved nutrition
literacy among Filipinos.

Excise Tax on MINERAL PRODUCTS

TRAIN Law increases the excise tax rate on domestic or imported coal and coke in 3 tranches
beginning January 1, 2018 to January 1 , 2020 as follows:

It also increases the excise tax rate on other mineral products as follows:
PERSONS LIABLE TO EXCISE TAX
A. ON DOMESTIC OR LOCAL ARTICLES
-Manufacturer
- Producer
- Owner or person having possession of articles removed from the place of production
without the payment of taxe

B. ON IMPORTED ARTICLES
- importer
- owner
- person who is found in possession of articles which are exempt from excise taxes other
than those legally entitled to exemption

TIME OF PAYMENT:

In General

 On domestic products

o Before removal from the place of production
 On imported products

o Before release from the customs' custody
BUSINESS REGISTRATION
• Businesses are required to be registered first before the commencement of its economic
activities. Non-compliance to business registration renders the business illegal.

• Upon registration, the taxpayer will indicate in the BIR form whether his business is subject to
VAT or OPT.

• If the products of the business are harmful or nonessential, in addition to VAT or OPT, excise
tax shall also be imposed

INVOICES AND RECEIPTS

• The taxpayer shall apply for the authority to print with the BIR before the printing of invoice and
receipts. The invoices and receipts should be registered with the BIR.
• The cash register receipts must show, among others, the following:
• Proprietor’s business name;
• Business address;
• VAT or non-VAT number; •
• Amount and date of transaction

•In case of VAT invoice, the amount of tax shall be shown as a separate item in the invoice or
receipt.
•A commercial invoice is to be issued for sale of goods while an official receipt is to be issued
for the amount of cash received from sales or rendering of services.

ADMINISTRATIVE PROVISIONS REGULATING BUSINESS OF PERSONS DEALING IN

ARTICLES SUBJECT TO EXCISE TAX
Extent of Supervision Over Establishments Producing Taxable Output. — The BIR has authority
to supervise establishments where articles subject to excise tax are made or kept. The
Secretary of Finance shall prescribe rules and regulations as to the mode in which the process
of production shall be conducted insofar as may be necessary to secure a sanitary output and to
safeguard the revenue.

Revenue Officers-On Premise (ROOP): to implement the above, every place of production has
a revenue officer on premise which signs every Excise Tax Removal Declaration (ETRD) and
Shipping Memo, to ensure that the excise taxes on the products removed from the place of
production were already paid prior to such removal.

Records to be Kept by Manufacturers; Assessment Based Thereon. — Manufacturers of articles

subject to excise shall keep such records as required by rules and regulations recommended by
the Commissioner and approved by the Secretary of Finance, and such records, whether of raw
materials received into the factory or of articles produced therein, shall be deemed public and
official documents for all purposes.
The records of raw materials kept by such manufacturers may be used as evidence by which to
determine the amount of excise taxes due from them, and whenever the amounts of raw
materials received into any factory exceeds the amount of manufactured or partially
manufactured products on hand and lawfully removed from the factory, plus waste removed or
destroyed, and a reasonable allowance for unavoidable loss in manufacture, the Commissioner
may assess and collect the tax due on the products which should have been produced from the
excess.